Still underweight equities

The 11th of March (OSEBX close 435) I expected a correction to OSEBX, which reached an intraday low over the past few months of 409 the 15th. This was less of a correction than expected (but still down 6% within a few days). Since then the index has returned to trading in the narrow tunnel of 430 to 445, having difficulties breaching the barrier of the 76.40 fibb levels. Closing today at 436, virtually unchanged since the last update (and as such a better return for being allocated elsewhere).

The uncertainties regarding the peripherals in the eurozone, as well as increasing signals of weaker growth in the economies still support an underweight in equities. This is further supported by expectations of rate hikes which should make bonds increasingly attractive, and could reduce liquidity flowing into equities. In the current yield environment, however, the credit spreads found for higher rated debt instruments supports investments in Floating Rate Notes rather than bonds or equities.

In support of buying OSEBX we have a rising 200 daily moving average, currently at 417 (roughly 4.5 per. cent. down from today's close) which could prove a resistance level. But the risks in the economy in my opinion still provide a poor Risk/Reward.

Updated technical analysis of OSEBX:

(click image for full size)

4 thoughts on “Still underweight equities”

  1. While I can appreciate the points in Sumptuous Capital: Blog » Blog Archive » Still underweight equities, I am sick and tired of hearing rubbish about the "economic recovery". The US government borrowed and spent $6.1 trillion during the last 4 years to obtain a cumulative $700B increase in the nation's Gross domestic product. That means we've borrowed and spent $8.70 for every $1 of nominal "economic growth" in Gross domestic product. In constant dollars, GDP is flat, we've got no "economic growth" at all for the $6.1 trillion. In constant dollars, the GDP in 2011 might return to the 2007 level, if the US economy continues "growing" at the same pace reached inside the first ninety days of 2011. If not, then the GDP will actually be lower than pre-recession levels. There is no economic recovery, the numbers prove this.

  2. While I agree with the basics in Sumptuous Capital: Blog » Blog Archive » Still underweight equities , I think the positive sentiment around at the moment is a concequence of a false set of circumstances. The demand for consumer finance is still poor and there is no significant improvement in the housing sector. The developed nations are surviving on their politicians ability to just borrow and spend into their countries which is difficult to maintain. Regards, Darleen Kalmer.

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